EPA Regulation of Greenhouse Gas Emissions from New Power Plants

This page discusses EPA's final standards for new power plants issued on August 3rd, 2015. For a discussion of the standards for existing power plants click here[1].

The U.S. Environmental Protection Agency (EPA) released a final rule to limit greenhouse gas emissions from new power plants on August 3, 2015. The final “Carbon Pollution Standard for New Power Plants[2]” replaces earlier proposals from September 2013 and March 2012. It would establish New Source Performance Standards[3] (NSPS) under the Clean Air Act to limit emissions of carbon dioxide (CO2) from coal- and natural gas-fired power plants. C2ES submitted public comments in response to EPA's proposal for new power plants from September 2013, which can be found here[4]. EPA also simultaneously released a final rule to limit carbon emissions from existing power plants.

How would the standards work?

New Source Performance Standards[5] set limits on emissions based on EPA’s assessment of available technologies. As with many other Clean Air Act programs, EPA establishes a standard for a given category of facility, which state environmental agencies then translate into requirements for individual facilities.

EPA’s final "Carbon Pollution Standard for New Power Plants[2]" was developed under Section 111(b)[6] of the Clean Air Act. Section 111(b) calls for a standard that "reflects the degree of emissions limitation achievable through the application of the best system of emissions reduction which (taking into account the cost of achieving such reduction and any non-air quality health and environmental impact and energy requirements) the Administrator determines has been adequately demonstrated." The emissions limit must take the form of a standard – in the case of power plants, maximum allowable CO2 emissions per unit of electricity – and may not prescribe a particular technology.

The Act ostensibly requires EPA to review the technological options available and, if appropriate, establish a new standard every eight years. In practice, standards have typically remained unexamined and unchanged for much longer than eight years, often because of resource constraints at EPA.

What does the standard require?

The final rule sets separate standards for new power plants fueled by natural gas and coal. New natural gas power plants can emit no more than 1,000 pounds (lbs) of carbon dioxide per megawatt-hour (MWh) of electricity produced, which is achievable with the latest combined cycle technology[7].

New coal power plants can emit no more than 1,400 lbs CO2/MWh, which almost certainly requires the use of carbon capture and storage (CCS[8]) technology.

In the power sector, CCS is in use at a commercial-scale power plant[9] in Saskatchewan, Canada, and will be employed at two commercial-scale power projects under construction in Kemper County, Mississippi, and in Thompsons, Texas. CCS technology is also in place in several industrial facilities, some of which generate as much carbon dioxide as a commercial-scale power plant.

How is this different from the standard EPA proposed in September 2013 or March 2012?

Similar to EPA’s earlier proposals, the final rule requires almost all natural gas power plants to meet an emissions standard of 1,000 lbs CO2/MWh.

In contrast to its proposed rule from September 2013, the final rule requires new coal-fired power plants to meet a less stringent emissions standard equal to 1,400 lbs CO2/MWh from the beginning of the power plant’s lifetime.

Under its proposal from September 2013, EPA would have required new coal power plants to meet more stringent standards with CCS, but a power plant could choose from two different compliance options. New coal plants could either emit less than 1,100 lbs CO2/MWh upon the beginning of operations or an average of 1,000 to 1,050 lbs CO2/MWh within the first seven years of operations.

In March 2012, EPA’s first proposal for limiting carbon emissions from new power plants[10] would have subjected all new power plants to a uniform standard: 1,000 lbs CO2/MWh. Many of the public comments received by EPA on its initial proposal objected to the unprecedented use of a single standard for both coal- and natural gas-fired plants. EPA responded in its proposal from September 2013 by including a separate standard for each fuel.

What are the costs associated with the final rule?

EPA expects this standard to have negligible costs through 2022 (the intended time horizon of the standard), since very few new coal plants are planned, even without the proposed standard, and since developers of new natural gas plants should see minimal, if any, additional costs.

If a developer chooses to build a new coal plant, the proposed standards could add considerable costs to the project because it will have to employ CCS technology. Since CCS technology is just reaching commercial maturity for power plant applications, its costs are still relatively high. However, as with any new technology, costs will come down as developers gain experience and new innovations are made.

What effect is this proposal expected to have on carbon dioxide emissions?

In the near future, the final rule is expected to have very little impact on emissions because so few new coal plants would likely be built even without the standard. Nearly all new fossil-fuel power plants in the planning stages will be fueled by natural gas, using generation technology that complies with EPA’s final standards without any alterations. Power plant developers already have strong incentive to use the most efficient technology to maximize the amount of electricity that can be generated from each unit of fuel.

If a developer chooses to build a new coal plant, the requirement that the plant install CCS technology will drastically reduce its emissions. Increased deployment of CCS technology at power plants will very likely drive CCS costs down and make it a more viable option at other new coal plants. Through experience and innovation, CCS costs may come down enough to be viable on new natural gas power plants, or as retrofits on existing coal plants, to reduce carbon dioxide emissions from the power sector even further.

What can power plants do to reduce emissions?

New natural gas plants[7] can reach the final CO2 standard by employing efficient generation technology. In older steam turbine plants, natural gas is combusted to heat water, which creates steam to turn a turbine and generate electricity. These plants have thermal efficiencies of 30-35 percent, meaning about one third of the chemical energy stored in natural gas is converted to electricity. In contrast, new combined cycle combustion turbines more effectively take advantage of the energy in natural gas to operate with a thermal efficiency above 60 percent.

New coal[11] plants, on the other hand, cannot achieve the final standard through efficiency alone. The most efficient type of coal plants, using ultra-supercritical boilers or integrated gasification combined cycle technology, can currently achieve a CO2 emission rate of around 1,700 lbs/MWh.

Thus, new coal plants can only meet a standard of 1,400 lbs CO2/MWh through the use of CCS, which can capture a significant portion of a power plant's potential emissions. CCS is a multi-stage process in which potential CO2 emissions are captured from a power plant instead of vented into the atmosphere. Captured CO2 is transported via pipeline and injected into an underground geological formation for permanent storage. EPA has established certain regulatory requirements for demonstrating the permanent underground storage of CO2. Certain proposed CCS power plants are aiming to capture nearly 90 percent of potential emissions, which translates into an emissions rate of potentially less than 500 lbs CO2/MWh.

If new coal plants must use carbon capture and storage technology, what will that mean for the future of coal? How far along is CCS technology?

Even if EPA were not moving forward with this standard, very few new coal plants would likely be built, in large part because of the availability of affordable natural gas. The Energy Information Administration lists only four potential coal plants between now and 2018, compared with more than 200 expected natural gas plants.

Today, there are 13 active commercial-scale CCS projects at industrial plants around the world (eight of them in the United States). The world’s first commercial-scale CCS power plant – the Boundary Dam Power Station in Saskatchewan, Canada – has been in operation since late 2014. Two additional commercial-scale power plants with CCS are under construction. Southern Company's Kemper County Energy Facility in Mississippi is expected to come online in late 2015 or early 2016, while NRG Energy's Petra Nova project in Texas is expected to come online in 2017. All three projects are coal-fired.

Approximately 50 additional commercial-scale CCS projects in the power and industrial sectors are in various stages of development around the world. Learn more about the status of CCS technology here[8].

How would existing state policies, such as the Regional Greenhouse Gas Initiative, be affected?

The final rule for new power plants would likely be layered on top of existing state programs. For example, a new plant operating in the Regional Greenhouse Gas Initiative (RGGI) territory would have to achieve the final federal standard, and would also have to submit tradable emission allowances annually to comply with the requirements of RGGI.

How does the final rule relate to EPA’s work on a standard for existing power plants?

Section 111 of the Clean Air Act requires EPA to regulate greenhouse gas emissions from new and existing power plants under two separate but related provisions. Section 111(b) requires EPA to set emission performance standards for new, modified, and reconstructed power plants, while Section 111(d) requires EPA to set guidelines for existing power plants. The guidelines for existing power plants cannot be finalized until a final standard is in place for new power plants.

Section 111(b) vests relatively more authority in EPA, and is more straightforward. EPA is required to find emission-reduction technology that has been adequately demonstrated and use this to set federal, numerical performance standards that new power plants must meet. These Section 111(b) standards are implemented by the states, as are most EPA air rules, but states do not have much flexibility to alter the standards set by EPA. On the other hand, under Section 111(d)[1], states have greater flexibility in how they implement the EPA standard. For instance, Section 111(d) allows for the possibility of market-based mechanisms to reduce emissions system-wide, rather than focusing on individual power plants.

Under what authority is EPA regulating greenhouse gas emissions?

EPA is required by the Clean Air Act to develop and enforce regulations on greenhouse gases, much in the way it regulates other air pollutants. This authority was clarified in the U.S. Supreme Court decision in Massachusetts v. EPA (2007). The decision was a result of 12 states petitioning EPA to regulate greenhouse gases from new motor vehicles in 1999. The Supreme Court ruled that greenhouse gases meet the definition of air pollutants under the Clean Air Act and must be regulated if these gases could be reasonably anticipated to endanger public health or welfare. Responding to the Court’s ruling, EPA finalized an endangerment finding in December 2009. Based on overwhelming scientific evidence it found that six greenhouse gases, including carbon dioxide, constitute a threat to public health and welfare. Thus, it is the Supreme Court’s interpretation of the existing Act and EPA’s assessment of the scientific evidence that form the basis for EPA’s regulatory actions.

Once any substance becomes a regulated pollutant under the Clean Air Act, certain other provisions of the Act automatically kick in. Greenhouse gases first became regulated under the Act with EPA’s rule setting new standards for light-duty vehicles[12]. This, in turn, triggered the requirement that major new or modified stationary sources be subject to a handful of Clean Air Act provisions, including Section 111(b).

Has EPA regulated greenhouse gas emissions before?

Yes. In addition to its existing greenhouse gas standards[12] for new light duty vehicles, EPA regulates greenhouse gas emissions from new, large stationary sources through a process called New Source Review (NSR). If a new emissions source, including a power plant, will emit above a certain threshold, it must acquire a permit to emit greenhouse gas. This permit will include a requirement that the source employ the Best Available Control Technology (BACT) to ensure it will take all feasible steps available to limit greenhouse gas emissions. BACT is set on a source-specific basis, and so far EPA has determined BACT for greenhouse gas emissions from power plants to be efficiency improvements. Once EPA’s proposed NSPS is finalized, new power plants will have to comply with both this NSPS and NSR, as well as other permitting requirements already in place.

Why is regulation of greenhouse gas emissions from power plants important?

Electric power generation is responsible for about 40 percent of U.S. emissions of carbon dioxide, the primary greenhouse gas.

Figure 1: 2013 U.S. CO2 Emissions

Source: Energy Information Administration

Since the federal government adopted new vehicle standards[12] in August 2012 to reduce transportation-related emissions, the power sector represents the next opportunity to achieve significant carbon reductions.

Coal and natural gas are used to fuel around two-thirds of U.S. electricity generation, and are responsible for nearly 100 percent of power sector CO2 emissions. As shown in Figure 2, the United States currently obtains 30 percent of its electricity from natural gas. Since 2000, however, natural gas has accounted for over 90 percent of new fossil generation capacity, and most new generation planned for the next few years will be fueled by natural gas.